1400 16th Street, NW Suite 420 Washington, DC 20036 Tel. 202.939.1760 Fax. 202.265.4435 NRMLA ETHICS ADVISORY OPINION 2010‐01 ETHICAL HECM‐TO‐HECM REFINANCING AND ANTI‐CHURNING PRACTICES September 30, 2010 The Ethics and Standards Committee (the "Committee") of the National Reverse Mortgage Lenders Association ("NRMLA"), the trade association of the reverse mortgage lending industry, enforces the NRMLA Code of Ethics and Responsibility (the "Code of Ethics"). All NRMLA Members are required to comply with the Code of Ethics as a condition of their continued membership in NRMLA. If the Committee determines that a NRMLA Member has not complied with the Code of Ethics, sanctions may be imposed, up to and including the termination of NRMLA Membership. Committee decisions enforcing the Code of Ethics may be made public. The Committee also interprets the Code of Ethics, and, from time to time, proposes changes to it for consideration and approval by the NRMLA Board of Directors. On September 21, 2010, HUD published Mortgagee Letter 2010‐34 (HECM Saver). Under its authority, and effective October 4, 2010, borrowers seeking HECM reverse mortgage loans may select either of two HECM loan products to meet their needs: (1) the current HECM Standard form of loan (for mortgagors who, in general, wish to have available to them a relatively larger amount with a relatively higher upfront initial mortgage insurance premium (MIP)); or (2) the new HECM Saver form of loan (for mortgagors who, in general, wish to have available to them a relatively smaller amount with a relatively smaller upfront initial MIP). In addition, Mortgagee Letter 2010‐34 provides that the amount of HECM loan proceeds for all mortgage loans originated after its effective date (both HECM Standard and HECM Saver), including refinances of such HECM loans after that date, must be reduced (from those available before that date), in accordance with changes made by HUD to its "Principal Limit Factor" tables. With the advent of a second FHA‐insured HECM loan product, the establishment of different principal limits (the maximum amount made available to the mortgagor under the loan), and the provision of various initial MIP and loan cost features, both mortgagors and lenders have a new array of choices available to them. In addition, with respect to the pipeline of existing loan applications (Pipeline Loans), which do not close before the effective date of the Mortgagee Letter, an election will need to be made. 25
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